High Court holds that notifying third parties outside the jurisdiction of a worldwide freezing order is not an abuse of process

High Court holds that notifying third parties outside the jurisdiction of a worldwide freezing order is not an abuse of process

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In an article we published last month, we considered the High Court’s decision in GML International Limited v Harfield to grant an application for a post judgment worldwide freezing order (WFO) against a judgment debtor who had fabricated his defence in the underlying proceedings.  

A freezing order acts to restrain a party from dealing with or disposing of its assets, and is typically sought to preserve the party’s assets until a judgment can be obtained and satisfied. Parties can usually expect a court will only exercise its discretion to grant a WFO where it is just and convenient to make the order, and where the applicant has demonstrated there is a real risk of dissipation of the respondent’s assets. A WFO, as the name suggests, extends to assets located anywhere in the world and is a particularly draconian measure. 

The High Court’s decision in GML v Harfield was unusual as there was no evidence the defendant had taken any steps to dissipate his assets. In granting the order, the court took into account the defendant’s dishonest conduct in the proceedings and the decision served as a salient reminder of the discretionary nature of WFOs. Our analysis of the High Court’s decision in GML International Limited v Harfield and a summary of the factors the court will consider before making a WFO is available here.

However the High Court has recently given judgment in another case concerning WFOs which serves to re-enforce the discretionary nature of WFOs and, as in GML v Harfield, demonstrates the court’s attitude towards the draconian remedy. In YS GM Margin II and others v Lakhani and others [2020] EWHC 2629 (Comm), the court was asked to consider whether it was improper for the claimants, who had obtained a WFO against the defendants, to notify a third party outside the jurisdiction of the WFO. In this particular case, the claimants had sent a letter enclosing a copy of the WFO to a number of individuals, companies and financial jurisdictions outside the jurisdiction. The letter stated:

Any other person who knows of this Order and does anything which helps or permits the respondent to breach the terms of this order may also be held to be in contempt of court and may be imprisoned, fined or have their assets seized."

The court confirmed that it was not an abuse of process for the claimants to notify third parties outside the jurisdiction of the WFO as part of a legitimate aim of trying to make a WFO effective. The judge did warn, however, that it was important not to misrepresent the effect of the WFO to a third party outside the jurisdiction. In the judge’s view, the claimants’ references to contempt of court were not appropriate since it would be unusual for contempt of court to apply directly to a third party outside the jurisdiction. While the judge acknowledged that the terms of the claimants’ original letters went too far, he did not consider it was appropriate to discharge the WFO on that basis. Accordingly, the court simply required the claimants to send ‘corrective’ letters explaining the position to all relevant parties. 

The decision again demonstrates that while parties who have obtained WFOs must take care, they can potentially be used as a very effective means of ensuring a defendant does not dissipate its assets.  

 

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